Several taxes in the Canary Islands, including inheritance and gift taxes, will go up from January 2020. The personal income tax and the IGIC (similar to VAT) will increase. However, this article will be limited to a discussion of inheritance tax and gift tax.
For 2020: extremely favourable
Since 2016, a reduction of 99.90% existed in the Canary Islands for straight line heirs and the surviving spouse. In 2019, the then government extended this favourable regime to most family members. This exemption will be partially abolished from 1 January 2020.
A lower tax advantage, but still beneficial
First of all, children under 21 will continue to enjoy the 99.9% reduction in taxable base. So for this category, nothing will change.
For other family members, the reduction continues to apply up to the first €55,000. Between €55,000 and €65,000, the reduction is 90%. From 65,000 euros, the exemption decreases in stages.
When the taxable basis of the estate or gift exceeds 305,000, the favourable measure disappears completely. Then rates between 7.65% and 34% apply.
How does inheritance and gift tax work in Spain?
Inheritance tax and gift tax are regulated through a Spanish national law (Impuesto sobre Sucesiones y Donaciones). This law sets the minimum conditions.
In addition, the various Spanish autonomous regions can supplement the national law with their own exemptions and/or reductions. For example, the Canary Islands reduce the taxable basis of the estate. In Andalusia, in turn, there is an exemption of up to €1,000,000 for direct line heirs. In the Balearic Islands and Catalonia, there are different rates etc. So each autonomous region has a different regime.
In general, whether buying, inheriting or gifting, taxes in the Canary Islands are still low. Especially if you compare with other Spanish regions.
Read more about inheritance tax and gift tax in the different Spanish autonomous regions.
What about Flanders?
If you inherit property in the Canary Islands, you will pay both Spanish and Flemish inheritance tax on it. From the Flemish tax, you can deduct the tax paid in Spain. However, the inheritance tax in Flanders is higher, making it advisable in certain situations to gift Spanish property. Think, for example, of a gift with reservation of usufruct.
Read more about inheritance tax in Spain and Flanders.
Do you have questions about inheritance and gifts in the Canary Islands? Or are you thinking of buying Spanish property? Confianz advises you with the structuring your assets in Spain.
Update: January 2020
